Absolute Form of PPP
Absolute form of purchasing power parity (PPP) theory that explains how inflation differentials affect exchange rates. It suggests that prices of two products of different countries should be equal when measured by a common currency. If a discrepancy in prices as measured by a common currency exists, the demand should shift so that these prices converge.
It is based on the notion that without international barriers, consumers shift their demand to wherever prices are lower.
Category: Banking & Finance
Previous: ← Purchasing Power Parity (PPP)
Next: Relative Form of PPP →
More from this Section
- Marginal propensity to consume
Marginal propensity to consume is the slope of the consumption function line that measure ... - Official Reserves Account
The Official Reserves Account is the total reserves held by official monetary authorities ... - Bank collection float
Bank collection float is the time that elapses between when a check is deposited into ... - Retail banks
Retail banks is the smaller-denomination loans extended to individuals and families as ... - Integrated risk management
Integrated risk management is a risk management technique that combines coverage for pure ...